CMA draft guidance on environmental claims – six new principles for businesses to follow

What is the update?

On 21 May 2021 the Competition and Markets Authority (CMA) published for consultation draft consumer protection law guidance for all businesses making environmental claims.

The purpose of the guidance is to help businesses to understand and comply with their existing obligations under consumer protection law and to help consumers make better informed choices about the so-called "eco-friendly" products they buy.

The guidance goes beyond existing obligations on businesses regarding environmental claims set out in the CAP and BCAP Codes. In particular, it potentially imposes greater obligations on businesses to consider – and disclose information about – the entire lifecycle of a product or service. It also suggests that the omission of certain information (eg about lifecycle environmental impacts and recyclability) might be a misleading omission despite the fact that generally-applicable consumer protection legislation does not impose a specific positive obligation on businesses to disclose information about these features. 

The consultation closes on 16 July 2021.

The proposed guidance sets out six principles that environmental claims must follow.

They must:

• Be truthful and accurate – businesses must live up to the claims they make about their products, services, brands and activities.
• Be clear and unambiguous – the meaning that a consumer is likely to take from a product's messaging and the credentials of that product should match.
• Not omit or hide important information – claims must not prevent someone from making an informed choice because of the information they leave out.
• Only make fair and meaningful comparisons – any products compared should meet the same needs or be intended for the same purpose.
• Consider the full life cycle of the product – when making claims, businesses must consider the total impact of a product or service. Claims can be misleading where they don't reflect the overall impact or where they focus on one aspect of it but not another.
• Be substantiated – businesses should be able to back up their claims with robust, credible and up to date evidence. Businesses must avoid hyperbole or subjective assessments; most environmental claims are likely to have objective or factual claims that can be tested against scientific or other evidence. 

Insight gained from the guidance on each of the principles

There is a good deal of "goes without saying" content attached to each of the principles (such as "claims must contain correct information and must be true" and "qualifications and caveats must be clear and prominent enough for consumers to see and understand them") which is derived from generally applicable principles of ad regulation. However, there are also some areas of insight particularly relevant in our experience to environmental claims, which we draw out below.

Claims must be truthful and accurate

There is a preference for claims to be specific (and justifiable) rather than more general. If general claims are to be used, they should be explained and targeted at the specific part(s) of the product to which those claims attach:

• If advertisers use terms which have specific or widely assumed meanings, the advertiser should justify their use (eg an organic product needs to consist almost entirely of organic components).
• Broader, more general or absolute claims are more likely to be inaccurate, unclear and to mislead. Terms like 'green', 'sustainable' or 'eco-friendly,' especially if used without explanation, are likely to be seen as suggesting that a product as a whole has a positive environmental impact, or at least no adverse impact. Advertisers using those terms would need clear evidence that their products have a positive, or no adverse, impact. 
• Claims may be able to focus on specific aspects of a product's environmental impact (eg about part of a product or process). 
• Claims that focus on specific aspects of a product's environmental impact, must make that clear. If not, consumers are likely to be misled into thinking the claim relates to the whole product. 
• But focusing just on one part of a product is not necessarily problem-free and could still mislead. For example, doing so could overlook significant negative impacts from other parts of the product or that the benefit comes at a significant environmental cost (eg advertising a product as 'recyclable' because it is packaged within a bamboo container would mislead if it contained plastic which wasn't recyclable and that wasn't made clear). Likewise, changing a small part of a product to make it recyclable but extrapolating from that change to say that the product is now 'green', when making the change itself came at an environment cost, could provide a misleading overall impression.
• If a claim fails to make clear what aspect of a product or business it relates to, it is liable to mislead. Even where that is clear, claims which ignore significant negative environmental impacts to focus on minor benefits or small parts of a business's activities are still at risk of misleading consumers. For example, claims that an electric vehicle produces zero emissions are liable to mislead but not a claim that it produces zero emissions 'when driving'. 
• Use of labels, certifications or logos can give a misleading impression. Self-assessed and self-declared marks or symbols are more likely to raise concerns. They risk suggesting that a product, service, brand or business meets particular standards and is endorsed or independently certified as doing so.
• Advertisers will have to consider many aspects of their products when thinking about making green claims. For example, there are a range of possible environmental impacts linked to holiday accommodation. It may, for instance, be constructed from particular materials or have heating systems that minimise emissions, or the business may participate in a carbon offsetting scheme.

Claims must be clear and unambiguous 

Precision and clarity are very important. The more precise and clear a claim, the easier it will be for consumers to understand it and for an advertiser to substantiate it.

• Vague and/or general statements of environmental benefit are more likely to be misleading. At best, they can have a number of meanings that can confuse consumers, making it difficult for them to make informed decisions. At worst, they can give the impression a product is better for the environment than is really the case. They can also be difficult to substantiate.
• Key words should be defined, unless their meaning is clear and widely understood by consumers. Terms with multiple meanings should also be explained to ensure they are not misinterpreted.
• Vague or general claims such as 'eco' or 'sustainable' are risky. Products would have to live up to the impression that is given. It is preferable for an advertiser to use specific terms or include explanations to convey particular meanings or impressions. 
• For general claims, such as 'recyclable', it should be clear which elements of a product are recyclable and under what conditions. 
• If a claim is only made about a part of a product, that should be made clear.

Claims must not omit or hide important information

Focusing on one part of a product can mislead if it gives a better impression of the product than is justified considering the other parts of the product. Cherry-picking beneficial parts of a product is risky.

• Claims should not just focus on the positive environmental aspects of a product, where other aspects have a negative impact and consumers could be misled. This is especially so if the benefits claimed only relate to a relatively minor aspect of a product. Cherry-picking information like this is likely to make consumers think a product as a whole is greener than it really is.
• Advertisers will need to think about the while life cycle of the relevant product and the impact of all its activities. For example, it could be misleading for an organic soup brand to say on its carton "Nature's Friend – organic and sustainably farmed", even where that is true about the ingredients, if the carton contains non-recyclable plastic, which has a negative environmental impact and is hard to dispose of other than in a landfill site or by incineration. 
• Where claims about carbon neutrality are based on offsetting by investing in CO2 compensation schemes, the claims should make that clear and provide information about the scheme. Otherwise, consumers could be misled into thinking that a product or process itself generates no emissions.
• As people are increasingly encouraged to recycle and are increasingly interested in doing so, failing to disclose on packaging whether it can be recycled, and where and how, is more likely to be misleading by omission. 
• When thinking about making any sort of environmental claim for products, advertisers should consider the overall impact of all their components. Cherry-picking beneficial aspects and highlighting those on any packaging or in any advertising for a product risks misleading consumers.
• A good rule of thumb would be to assume that consumers are likely to want to know about the overall environmental impact, including how easily a product and its packaging can be disposed of or recycled. Claims that include information enabling consumers to make informed decisions about that impact are less likely to involve misleading omissions.
• The durability or disposability of a product can have a significant effect on its environmental impact. It can be an important consideration for consumers in deciding what they buy so advertisers should consider durability when making claims, to avoid making misleading omissions. 
• Advertisers are encouraged to ask themselves about all the environmental impacts their products have, whether there are good reasons for not including information about those impacts in a claim, and whether customers can make an informed choice about what's on offer without that information.

Comparisons must be fair and meaningful

Comparisons should be based on clear and objective information and not be inaccurate or false. 

• Comparative claims should compare like with like. For example, a claim comparing two similar products' recyclable content should calculate that content in the same way for each product and be presented in a clear way. 
• Claims that appear to make market-wide comparisons, but which are actually based on a limited sample, have the potential to mislead consumers.
• A comparative claim that a clothing range is now 'greener' is unlikely to be fair and meaningful on its own, and risks misleading consumers, as it does not make clear the basis of the comparison. 

In making the claim you must consider the full life cycle of the product

All aspects of a product's environmental impact over its life cycle, including its supply chain, could be important. This includes its parts, its manufacturing, its use or performance, its disposal, the consequences of any environmental benefit claimed and whether the product has an overall adverse impact. 

• The accuracy of claims must be considered in the context of the total life cycle of the product. 
• Broad claims would need to be justified following a thorough assessment of a product's entire life cycle.
• Claims about one part of a life cycle should be clear about which part it relates to and not mislead about the total environmental impact. Ignoring one part of a life cycle can make a claim focusing elsewhere misleading. 
• Claiming that a product has a "lower carbon impact" when the only thing that has been changed is a small part of the production process – leaving unchanged a more significant, more carbon intensive part – is likely to mislead.
• Highlighting one of several environmental impacts a product has could mislead consumers to believe it is better for the environment overall. In those circumstances, the limitations of the claim must be clear, as must the overall impact on the environment of other (potentially more significant) parts of the product. 
• It is predicted that, in the coming years, consumers will demand more and clearer information about the provenance, processing and disposal of products.
• Calling a product 'eco' and packaging it with green rainforest imagery, because it is more compact and uses less plastic packaging than comparable products, will be misleading if, for example, raw materials come from far away, are shipped via freight for manufacturing and then shipped again for final packaging. The adverse environmental effects of major elements of the product make the 'eco' claim misleading. 

Claims must be substantiated

The nature of environmental claims likely means that scientific or other evidence will be available, and advertisers should have it. Environmental claims are unlikely to be 'puffery'. Supporting evidence needs to be robust, credible and up to date. It may come from, for example, published research, or studies a business has commissioned or conducted. The more independent and widely supported the evidence, the more likely it will be to support a claim. Evidence may be required from others in a supply chain. 

More detail on the background to the guidance 

The rationale for the guidance is to set out what the CMA proposes businesses should do to reduce the risk of misleading their consumers. Consumers must be able to trust the claims they see, and businesses must be able to substantiate them with evidence. Consumer protection law does not prevent businesses from making environmental claims about their products and services, provided they comply with the law, explaining the perceived need for further guidance and clarity for businesses from the CMA. 

Environmental claims matter because environmentally friendly products in the UK mean big business. According the CMA's consultation document, the UK market for sustainable products in 2019 was worth £41 billion, and since the start of the COVID-19 pandemic, there has been a shift in consumer behaviour towards more sustainable consumption practices. UK consumers therefore clearly take environmental consideration into account and shop sustainably. 

The stated problems this draft guidance is seeking to address are that:

• consumers do not trust environmental claims
• they are confused by the environmental information provided about goods or services
• they struggle to compare the environmental impact of different products
• there is lack of clarity as to the environmental impact of goods at different levels of a supply chain, and
• there is a lack of consistency in the use of certain terms when making environmental claims such as 'compostable', 'biodegradable' and 'recyclable'.

The draft guidance would apply to:

• businesses supplying products and services direct to consumers
• manufacturers and wholesalers to the extent that the claims they make about their products have a direct impact on consumers, and
• manufacturers and wholesalers to the extent that the claims they make mislead the businesses to whom they are supplying their products or services.

The draft guidance (and UK consumer protection law more generally) would be relevant to both:

• UK-based businesses, and
• businesses based outside the UK in so far as they are conducting activities in the UK.

The draft guidance sets out a series of high-level principles to help businesses comply with consumer protection law. It also sets out in more detail what businesses should do to apply those principles. Where businesses apply the principles they would, in the CMA's view, be less likely to mislead consumers and to break the law.

Here to help

Please get in touch with your usual Taylor Wessing contact if you would like to discuss the implications of the guidance and/or submitting a response on the consultation.